LIMITED LIABILITY COMPANY AGREEMENT
OF
[NAME OF LLC]
THIS LIMITED LIABILITY COMPANY AGREEMENT of [Name of LLC], a Washington limited liability company (the “Company”) is made and entered into effective as of [date] by [Names of Initial Members of LLC] as the initial Members of the Company, and such additional Members as may be admitted from time to time in accordance with the terms of this Agreement (the “Members”).
AGREEMENT
The parties have agreed to organize and operate a limited liability company in accordance with the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties, intending legally to be bound, agree as follows:
Article 1
DEFINITIONS
1.1 Definitions. In this Agreement, unless otherwise specifically stated, the capitalized terms used herein have the respective meanings specified or referred to in Annex I, attached hereto and incorporated herein by reference. Other terms are defined in the text of this Agreement and, throughout this Agreement, those terms have the meanings respectively ascribed to them.
Article 2
ORGANIZATION AND PURPOSE
2.1 Organization. The Members have organized a limited liability company pursuant to the Act and have caused the Certificate of Formation to be executed and filed for record with the Secretary of State of the State of Washington.
2.2 Name of the Company. The name of the Company shall be [Name of LLC]. The Company may do business under that name and under any other name or names which the Managers select. If the Company does business under a name other than that set forth in its Certificate of Formation, then the Company shall file an assumed business name as required by law.
2.4 Term. The term of the Company, which commenced on the date of filing of the Certificate of Formation, shall continue until dissolved and terminated pursuant to Article 9 of this Agreement.
2.5 Principal Office. The principal office of the Company in the State of Washington shall be located at [Address] or at any other place within the State of Washington that the Managers select.
2.6 Registered Agent. The name and address of the Company’s registered agent in the State of Washington shall be:
[Attorney]
2918 Colby Avenue, Suite 211
Everett, WA 98201
2.7 Members. The name, present mailing address, initial Capital Account balances, number of Units, and Percentage Interest of each Member is set forth on Exhibit A as amended from time to time.
Article 3
UNITS AND CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions and Issuance of Units. The Capital Contributions which each Member has made or is required to make to the Company are set forth on Exhibit A.
3.2 No Additional Capital Contributions. No Member shall be obligated to contribute any additional capital to the Company, and no Member shall have any personal liability for any obligation of the Company.
3.3 No Interest on Capital Contributions. Members shall not be paid interest on their Capital Contributions.
3.4 Return of Capital Contributions. Except as otherwise provided in this Agreement, no Member shall have the right to receive any return of any Capital Contribution.
3.5 Form of Return of Capital. If a Member is entitled to receive a return of a Capital Contribution, the Member shall not have the right to receive anything but cash in return of the Member’s Capital Contribution.
3.6 Loans. Any Member may make or cause a loan to be made to the Company in an amount and on those terms upon which the Company, acting through its Managers, and the Member agree.
Article 4
ALLOCATIONS AND DISTRIBUTIONS
4.1 Allocation of Profit or Loss. After giving effect to the special allocations set forth in Section 4.3, for any Allocation Period of the Company, Profit or Loss shall be allocated to the Members in proportion to their Percentage Interests; provided, however, that Loss allocated pursuant to this Section 4.1 shall not exceed the maximum amount of Loss that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any taxable year. In the event that some but not all Members would have an Adjusted Capital Account Deficit as a consequence of an allocation of Loss pursuant to this Section 4.1, the limitation set forth in the foregoing proviso shall be applied on a Member by Member basis so as to allocate the maximum permissible Loss to each Member under Regulation Section 1.704-1(b)(2)(ii)(d). In the event that in any year, Loss is allocated other than in accordance with Percentage Interests, the next succeeding allocation of Profit shall offset such loss allocation.
4.2 Distributions.
4.2.1 Distributions for Taxes. Unless otherwise unanimously agreed to by the Members, the Company shall, to the extent it has Available Cash, annually make distributions to the Members in proportion to their Percentage Interests to permit the Members to pay Federal income taxes with respect to their allocable shares of income from the Company for such taxable year. Such annual distributions shall be made within ninety (90) days of the close of the Company’s taxable year in question. For purposes of this Section 4.2.1, and unless otherwise unanimously agreed to by the Members, the Managers shall assume that the Members’ income from the Company is subject to the highest marginal federal income tax rate applicable to individuals.
4.2.2 Other Distributions. All other distributions shall in such amount and at such time as determined by the Managers in their sole discretion.
4.2.3 Withholding. The Managers are authorized to withhold from distributions, or with respect to allocations or payments, to Members and to pay over to the appropriate federal, state or local governmental authority any amounts required to be withheld pursuant to the Code or provisions of applicable state or local law. All amounts withheld pursuant to the preceding sentence in connection with any payment, distribution or allocation to any Member shall be treated as amounts distributed to such Member pursuant to this Section 4.2.
4.2.4 Limitation on Distributions. Notwithstanding any other provision of this Agreement, distributions shall be permitted under this Section 4.2 only to the extent of the Company’s legally available funds for distribution as described in RCW 25.15.235.
4.3 Regulatory Allocations. The special allocations described in the following paragraphs of this Section 4.3 shall be made for each Allocation Period in the order of the paragraphs:
4.3.1 Minimum Gain Chargeback. Except as set forth in Regulation Section1.7042(f), if, during any Allocation Period, there is a net decrease in Minimum Gain, each Member shall be specially allocated items of gross income and gain for such Allocation Period (and, if necessary, subsequent Allocation Periods) in an amount equal to that Member’s share of the net decrease of Minimum Gain, computed in accordance with Regulation Section1.7042(g). Allocations of items of gross income and gain pursuant to this Section4.3.1 shall be made as described in Regulation Sections1.7042(f) and(j). This Section4.3.1 is intended to comply with, and shall be interpreted consistently with, the “minimum gain chargeback” provisions of Regulation Section1.7042(f) and all other Regulation Sections relating thereto.
4.3.2 Member Minimum Gain Chargeback. Except as set forth in Regulation Section1.7042(i)(4), if, during any Allocation Period, there is a net decrease in Member Minimum Gain, each Member with a share of that Member Minimum Gain as of the beginning of such year shall be specially allocated items of gross income and gain for such Allocation Period (and, if necessary, subsequent Allocation Periods) in an amount equal to that Member’s share of the net decrease of Member Minimum Gain, computed in accordance with Regulation Section1.7042(i)(4). Allocations of items of gross income and gain pursuant to this Section4.3.2 shall be made as described in Regulation Sections1.7042(i)(4) and (j). This Section4.3.2 is intended to comply with, and shall be interpreted consistently with, the “minimum gain chargeback” provisions of Regulation Section1.7042(i)(4) and all other Regulation Sectionsrelating thereto.
4.3.3 Qualified Income Offset. No Member shall be allocated Losses or deductions if the allocation causes the Member to have an Adjusted Capital Account Deficit. If a Member unexpectedly receives any adjustments, allocations, or distributions described in Regulation Section1.7041(b)(2)(ii)(d)(4), (5) or (6) which results in or increases an Adjusted Capital Account Deficit at the end of any Allocation Period, then all items of income and gain of the Company for that Allocation Period shall be allocated to that Member in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly as possible; provided that an allocation pursuant to this Section 4.3.3 will be made if and only to the extent that such Member would have an Adjusted Capital account Deficit after all other allocations provided for in this Article 4 have been tentatively made as if this Section 4.3.3 were not in this Agreement. This Section4.3.3 is intended to comply with, and shall be interpreted consistently with, the “qualified income offset” provisions of the Regulation Section1.7041(b)(2)(ii)(d) and all other Regulation Sections relating thereto.
4.3.4 Nonrecourse Deductions. Nonrecourse Deductions for an Allocation Period or other period shall be specially allocated among the Members in proportion to their Percentage Interests.
4.3.5 Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Allocation Period or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the liability to which the Member Nonrecourse Deduction is attributable in accordance with Regulation Section1.7042(i).
4.3.6 Curative Allocation. The allocations set forth in Sections4.3.1 through4.3.5 (the “Regulatory Allocations”) are intended to comply with certain requirements of Regulation Section1.704-1(b) and Regulation Section1.704-2. Notwithstanding any other provision of this Article 4, the Company shall take the Regulatory Allocations into account in allocating other Profits, Losses, and items of income, gain, loss and deduction to the Members so that, to the extent possible, the net amount of such allocations of Profits and Losses and other items shall be equal to the amount that would have been allocated to each Member if the Regulatory Allocations had not occurred.
4.3.7 Overriding Allocation. It is the intent of the Company that each Member’s share of income, gain, loss, deduction or credit (or item thereof) shall be allocated in accordance with Section4.1 to the fullest extent permitted by Section704(b) of the Code. To preserve and protect the allocations provided for in Sections4.1, the Members are authorized and directed to allocate income, gain, loss, deduction or credit (or item thereof) arising in any year differently than otherwise provided for in Section4.1 if, and to the extent that, the allocations under Sections4.1 would cause the allocations to violate Section704(b) of the Code. Any allocation made pursuant to this Section4.3.7 shall be deemed to be a complete substitute for any allocation otherwise provided for in Section4.1 and no amendment of this Agreement or approval of any Member shall be required.
4.4 Tax Allocations.
4.4.1 Tax Allocations Follow Book Allocations. Except as otherwise provided herein, and to the extent permitted by Section1.7041(b)(4)(i) of the Regulations for federal and state income tax purposes each item of income, gain, loss and deduction of the Company shall be allocated to the Members in a manner that equitably reflects the manner its corresponding item of “book” income, gain, loss or deduction has been allocated under Section4.1 and 4.3.
4.4.2 Contributed Property and Bookups. To the extent permitted or required by Section704(c) of the Code and the Regulations thereunder, Regulation Section1.704l(b)(2)(iv)(d)(3) and Regulation Section1.7041(b)(2)(iv)(f), income, gain, loss, and deduction with respect to any property contributed (or deemed contributed) to the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of the property to the Company for federal income tax purposes and its Gross Asset Value. If the Gross Asset Value of any Company asset is adjusted pursuant to the definition of Gross Asset Value herein, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the adjusted basis of the asset for federal income tax purposes and its Gross Asset Value in the manner required under Section704(c) of the Code and the Regulations thereunder.
4.4.3 Election under Section754 of the Code. To the extent an adjustment to the tax basis of any Company asset pursuant to Section734(b) or Section743(b) of the Code is required, pursuant to Regulation Section1.7041(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of the adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases basis), and the gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to that Sectionof the Regulations.
4.4.4 Recapture. In making any allocation among the Members of income or gain from the sale or other disposition of a Company asset, the ordinary income portion, if any, of such income and gain resulting from the recapture of cost recovery or other deductions shall be allocated among those Members who were previously allocated (or whose predecessorsininterest were previously allocated) the cost recovery deductions or other deductions resulting in the recapture items, in proportion to the amount of such cost recovery deductions or other deductions previously allocated to them.
4.4.5 Guaranteed Payments. To the extent any compensation paid to any Member by the Company is determined by the Internal Revenue Service not to be a guaranteed payment under Section 707(c) of the Code or is not paid to the Member other than in the Person’s capacity as a Member within the meaning of Section 707(a) of the Code, the Member shall be specially allocated gross income of the Company in an amount equal to the amount of that compensation, and the Member’s Capital Account shall be adjusted to treat the payment of that compensation as a distribution.
4.4.6 Other Allocations. All items of Company income, gain, loss, deduction and credit the allocation of which is not otherwise provided for in this Agreement, including allocation of such items for tax purposes, shall be allocated among the Members in the same proportions as they share Profits or Losses for the Allocation Period pursuant to this Article 4.